UK unveils dramatic austerity measures

By Daniel Pimlott and Chris Giles in London and Robin Harding in Washington

The UK’s Conservative-led coalition has announced the most drastic budget cuts inliving memory, outstripping measures taken by other advanced economies which are also under pressure to sharply reduce public spending.

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The sweeping cuts in spending and entitlements far exceed anything contemplated in the US where Barack Obama, the president, has proposed only a three-year freeze on discretionary spending and Congress is still debating whether to extend tax cuts for the wealthy.

IN UK Economy

The UK cuts of £81bn ($128bn) over four years are the equivalent of 4.5 per cent of projected 2014-15 gross domestic product. Similar cuts in the US would require a cut in public spending of about $650bn, equal to the projected cost of Medicare in 2015

The UK deficit is about 10 per cent of 2010-11 GDP. The US deficit was $1,294bn, or 8.9 per cent of GDP, in the 2010 fiscal year.

Declaring that “today is the day where Britain steps back from the brink”, George Osborne, the chancellor of the exchequer, revealed dramatic reductions to core departments over the next four years, a £7bn fall in welfare support and 490,000 public-sector job cuts by 2014-15.

“Tackling the budget deficit is unavoidable,” Mr Osborne told parliament. “To back down now and abandon our plans would be the road to economic ruin.”

Following the crisis in Greece, UK policymakers are concerned about the willingness of investors to keep holding UK debt.

Local government will suffer more than most with reductions of nearly 30 per cent by 2015. The police force will see its budget trimmed by 16 per cent.

Two areas – the £4.6bn science budget and overseas aid, which will reach 0.7 per cent of GDP by 2013 – were protected.